California Surplus Should Be Set Aside, Lawmaker Says

California should funnel surplus revenue from capital-gains taxes into a reserve fund to avert cuts when the economy sags, Assembly Speaker John Perez said.

The Los Angeles Democrat, speaking yesterday on KXJZ-FM in Sacramento, said he wants a referendum on setting aside excess funds when revenue from capital gains exceeds 6.5 percent of projections. Once the reserve tops 10 percent of general-fund spending, which pays for most basic services -- about $97.6 billion in this fiscal year -- the excess could be spent on one-time needs, such as reducing debt, he said.

Income-tax revenue covered 61 percent of general-fund spending last year. In January, Governor Jerry Brown, a Democrat, said he expects an $850 million budget surplus by the conclusion of fiscal 2014, reversing years of deficits that cumulatively exceeded $100 billion since 2007. So far this year, tax collections have topped Brown’s projections by $4.5 billion.

“We need reserves for fire, we need reserves for contingencies,” Brown told reporters May 7. “We also need to pay down debt, which is a form of reserve. It frees up money.”

Perez’s rainy-day fund proposal would replace one already on the ballot next year. That plan, favored by Republicans and opposed by public-employee unions, would fill the reserve whenever all tax revenue exceeds 3 percent of general-fund spending. Democrats, who control both chambers of the legislature, can alter the ballot measure by a two-thirds vote.

Brown persuaded Californians in November to impose the highest statewide sales tax in the U.S., at 7.5 percent, and to boost levies on annual income starting at $250,000 -- reaching 13.3 percent on those making $1 million or more, the nation’s highest rate.

Brown is scheduled to update his budget proposal May 14 to reflect the latest revenue figures.

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.